Synopsis:
BofA expects the RBA to hold the cash rate at 4.1% at this week’s inaugural Monetary Policy Board meeting. A May rate cut remains the base case, and while no major policy shift is anticipated, dovish language tied to weak data could shape expectations.
Key Points:
1️⃣ April Hold Expected
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RBA to keep the cash rate unchanged at 4.1%, consistent with consensus and market pricing.
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Cutting in April would conflict with the RBA's “gradual easing” narrative and recent hawkish tone.
2️⃣ May Cut Still Base Case
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February's jobs report and soft CPI could influence a dovish tone, paving the way for a May rate cut.
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BofA suggests the next meaningful policy move comes then.
3️⃣ Market Impact Likely Muted
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Only 2bps of cuts are priced for this meeting, so a hold will likely have minimal impact on rates.
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Forward guidance and language shift (if any) will be closely watched for timing cues.
4️⃣ AUD Outlook Cautious
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BofA remains bearish AUD, citing sensitivity to US-China tensions and CNY policy shifts.
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Cautions against going long AUD at this point, especially with tariff and devaluation risks in play.
Conclusion:
Expect a status quo decision from the RBA, with dovish language potentially hinting at May action. Markets are already pricing this in, so focus will be on forward guidance and any new communication tone under the revamped Monetary Policy Board.
